The European Central Bank (ECB) is likely to implement additional measures following the results of the EU referendum, according to one chief economist.
William De Vijlder, group chief economist at BNP Paribas suggested that the ECB may take measures in terms of liquidity and the repo rate to counter the initial impact of Brexit.
“In responding to the shock of the UK referendum result the ECB is likely to provide additional liquidity to counteract any possible liquidity squeeze and a 10 base point rate is also possible.”
De Vijlder also spoke of the how the ECB’s quantitative easing (QE) initiative may be amended.
Initially announced by the ECB in January 2015, QE was designed to stabilise the Eurozone economy.
“Before Brexit we already expected an announcement in September of a six-month lengthening of the ECB’s QE programme from March 2017 to September 2017.
“The UK’s referendum result has strengthened the likelihood of such a move,” said De Vijlder.
Following the results of the EU referendum, a number of central banks across the world have attempted – including the Bank of England (BoE) – to reassure investors. BoE governor Mark Carney said it would pump more than £250 billion of additional funds through its normal facilities.
The Bank of Japan and ECB have also since released statements reaffirming that the availability of liquidity in order to keep the banking system running.